A natural monopoly occurs when a single firm can produce the entire output of the market at a lower average cost than could many firms.

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A natural monopoly arises when it is more efficient for one firm to produce the entire output of the market than for multiple firms to do so. This is often due to high fixed costs in the industry, which make it difficult for new firms to enter and compete. As a result, the single firm can achieve economies of scale and lower average costs over time, making it difficult for competitors to survive.

A Natural Monopoly Occurs When a Single Firm Can Produce